pg43_column-jim-reinertsenIncentives can produce improvements—or lower quality, if leaders are not vigilant.

 

Healthcare organizations are under great pressure to reduce costs while maintaining or improving quality and safety. It’s true that not all costs are within the direct control of providers (for example, the obesity epidemic, high malpractice costs, pockets of poor social support that spawn exceptionally high utilizers, and the mind-boggling administrative costs of our private multi-payer insurance model). 

However, some cost drivers are under our control. At the top of that list is overuse, driven mainly by the over-supply of procedural and specialty services, which in turn is driven by a payment model that rewards physicians for high volumes of lucrative procedures and tests. 

Also high on the list is misuse, driven by potentially avoidable complications of care, which occur because our organizational cultures, systems, and environments do not foster or reward high levels of safety and reliability. 

We know the old incentive system doesn’t work. But will our new set of incentives be any better? Will value-based purchasing (VBP) rewards for high scores on quality measures, penalties for healthcare-acquired conditions, bundled payments for procedures and chronic diseases, and accountability for cost and quality for populations in accountable care organizations (ACOs) change the cost trajectory while maintaining or improving quality and safety?

Deming on Incentives

As we watch this complicated experiment unfold, and as we urge our physicians and staff to achieve better scores on dozens of measures, leaders should keep in mind W. Edward Deming’s view of incentives. He held that there are three ways to achieve a better number: 

  • Improve the system (i.e., make things better)
  • Sub-optimize the system (i.e., achieve the number at the expense of something else, perhaps more important, but unmeasured)
  • Cheat

Deming warned that the stronger the incentive to achieve a number, the higher the likelihood of sub-optimization and cheating, rather than true improvement.

Examples of Deming’s concern are playing out now. Many organizations are expending enormous resources to achieve top decile performance on VBP measures, when the gap between current performance (95 percent, say) and top decile (usually 100 percent) is clinically insignificant and driven almost entirely by documentation and coding.

Could those resources be better spent improving something else that is unmeasured, but very important? Probably. Will hospitals that were stung by penalties for readmissions put pressure on their medical staffs to put patients in observation beds rather than readmit them? I’ve already seen that scenario playing out. What about the race to get meaningful use rewards for electronic health records that we aren’t really ready to deploy, and the potential for making safety worse instead of better (Institute of Medicine, Health IT and Patient Safety: Building Safer Systems for Better Care, 2012)? And who doesn’t think that aggressive coding won’t drive some bundled payment budgets and some risk-adjusted population costs, on which ACO shared savings will be based?

A Central Task

The volume-driven incentive system encouraged overuse and tolerated, if not rewarded, misuse. While the new value-driven incentives are designed to address those problems, leaders must be aware of the potential for any incentive system to drive sub-optimization and cheating, rather than true improvement. A central leadership task is to translate these new incentives to physicians and staff in ways that ensure that when you get a better number, you are producing a better system.


James L. Reinertsen, MD, is CEO, The Reinertsen Group.

Publication Date: Thursday, June 06, 2013